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BUSINESS DESIGN
Link to the prezi presentation: http://prezi.com/wyeuamo5skfr/?utm_campaign=share&utm_medium=copy Definition A business design gap can be described as failure by a company to capture significant and appropriate profits with its value proposition due to a poor business design. A company suffering from a business design gap will usually find itself in one of these two situations: *The business model captures value from and provides value to the customer but without the anticipated success *The business model does not result in commercial success at all In both of these situations the business model fails to increase the potential of your innovations, protect you from unexpected market changes, and does not make it difficult for your competitors to copy your competitive advantage. A proper business model figures out the right way to provide meaningful value to the customer and at the same time knows how to capture the associated value, which increases the innovation’s commercial success because it leverages its attributes. Characteristics: ''' *An innovation is not accompanied by a business model that sufficiently leverages the innovation’s potential *The business model does not deliver meaningful value to the customer *The business model does not capture enough value Creating the best and most innovative product or service in the world does not guarantee the success in the market place. Moreover, successful innovators do not limit the differentiation purely on the value proposition, but other elements of a company´s business model (i.e. new customer segments, new revenue streams, new channels, etc.). Diagnostic To determine whether or not a company is facing a business design gap, a series of questions can be asked: Does your business design increase the potential of your innovation? Is your business model creating a buffer that protects you from unexpected changes in the marketplace? Does your business-model make it difficult for your competitors to copy your competitive advantage? Case examples '''New Detergent - Case Study A perfect example of a business model gap is that of a start-up company some years ago. The company found a detergent that basically had two advantages that made it superior to other detergents in the market. Instead of the usual 8 stages of the washing program it could work with just 2 stages, thereby: *Decreasing the water usage *Decreasing the time of washing *Decreasing the energy usage to run the machine *Minimizing the abrasion on laundry This concluded in an overall significantly more eco-friendly product.However there were also some major disadvantages - the most important being that the initial costs were considerably higher. The company identified their main customer segment to be hotels having their own laundry operations. Though marketing a product with huge cost saving potential to the customer, the company was not successful in commercializing it. Their business model was designed so that their revenues would be generated by selling the product, and the value to the customers would be generated from saving on costs in the long run.It encountered several issues: *For hotel managers, laundry expenses were not one of the expenses where a cost decrease represented a priority. *It was unexpectedly hard to find a contact rather than a simple procurement agent who could see the potential of the product instead of just the high initial outlay, and that had the authority to get it through. *Most hotels would have to face a sudden change in their standard processes which in turn requires new processes & training of employees on the proper use of the new detergent We can now see that the company had misarranged perceptions on how their innovation could be successful in the marketplace. The chosen customer segment, preferably big hotel chains at touristic locations having large laundry operations and hence costs, would - once the detergent company managed to get through to a contact with the necessary authority - value the cost saving potential but it may not value to face the challenge of redesigning the processes and train their employees. The solution to close the gap could have been a consultancy service overtaking these challenges. If the company would have done so, they would provide the anticipated value as well as capture more with product sales and consultancy services. Applying the framework from the previous diagnostic shows that the company had two major lacks: *They did not create an attractive and meaningful value proposition. If a customer decided to implement the new detergent with his machines,the necessary changes ensued would significantly change the hotel's existing system, which itself means the staff would need to be trained once more for proper use. Issues which hotels may not have the time or skills for. and train staff on the proper use - issues that hotels may either not have the time for or the necessary skills. *They did not deliver measurable customer value to the customer because their product aimed at cost savings to be realized in the future, while initial outlay for the product itself was in the present. Solution: Escaping the gap Solving a business design gap is done in two steps, the first is identifying which part of the business model is underperforming, and the second is adjusting this part and bringing it up to par. Once this is complete, your business model should be able to be leverage for your innovation attempts. 'Step 1 – Assess your company with the 5 ‘S’' ** Sexiness corresponds to the attractiveness of your product, service, business model and the capacity of the innovation to fill the needs of customers and investors. **'Simplicity '''refers to the complexity of your product, service or business model which must be as simple as possible. The more a product is complex; less customers will understand it and leverage the innovation. **'Synergy''' is about the number of synergy’s levels between your innovation in one hand and resource allocation, distribution channels, possible partners, market trends… **'Scalability '''refers to growth and speed growth potential for your innovation. This growth depends on the market size first but then on scalability of the product, of the service, of the business model. **'Sustainability''' corresponds to the long term aspects of the innovation, it has to represent a potential for the long term. 'Step 2 - Make adjustments' After having analyzed your product with the aforementioned model, the next step is determining which section of the business model canvas it corresponds to. In other words, the various sections of the canvas and how their design influence the way each of the 5 ‘S’ is expressed. Thus, you must adjust the categories in which you ranked lowly, For a detailed walkthrough of the 5 ‘S’ analysis see Evaluating your business design. References Category:INNOVATION GAPS